An Effective Risk Management Strategy for Organizations

Risk management is becoming an increasingly difficult challenge for organizations. When this challenge is not met, there is a direct impact on the bottom line as the cost of insuring against risks increases. There are several sources of this dilemma, the most prevalent of which are safety issues and “ineffective” leadership and management. Any approach to risk management must address both of these areas in a comprehensive and integrated way.

We must start by conducting a thorough and accurate diagnosis of the current situation within the organization. This will identify those factors that are most likely to have a negative impact on the risk of accidents, spurious workers’ comp claims, and/or “revenge” litigation. We must use effective tools and processes that identify those factors and any other barriers to excellence that might exist in the workplace.

Safety – Resolving safety issues might be the most straightforward of the required risk management approaches. Although this will not be easy, we have lots of experience with conducting safety surveys to identify the hazards, removing those hazards, and training employees in effective safety practices, including those related to safe and effective use of materials and equipment. This approach will minimize the incidence of accidents and the lost productivity and the Workers’ Comp claims related thereto.

Leadership – This is probably the biggest contributor to spurious Workers’ Comp claims. In many cases, if the organization makes the employee suffer, the employee will find ways to make the organization pay, usually through some claim against the organization. The employee often justifies this on the basis of a perception that he/she is not valued and/or is taken for granted. In the worst case, the employee may even feel exploited or abused. When finally “fed up,” there will be attorneys waiting to help the employee file a claim.

So, what does this have to do with leadership? Effective leaders inspire others to commit their best in their employer’s service. They also create and maintain an organizational environment that encourages and supports employees in their pursuit of excellence. When these factors come together, employees find the work experience to be rewarding and fulfilling, and at the end of even the toughest day, they feel that they have done something for themselves while committing their best to their employer. That is the essence of “full engagement,” which is in short supply in organizations. When it does occur, employees are so busy trying to meet their expectations of themselves and those of important others that they are not suffering at their employer’s hand and have no reason to seek “revenge.”

Management – Effective management also contributes great value to an organization’s success, even when its leadership in exemplary. One of management’s primary roles is to articulate, in clear and unambiguous terms, the expectations that each employee must meet in order to perform successfully. This must include both the functional (what the employee must do) and the behavioral (how the employee must behave in carrying out the required functions). Most organizations do an acceptable job of articulating the functional expectations but often ignore or minimize the importance of the behavioral ones.

Another important management function is the establishment of standards against which employees’ performance will be evaluated. Again, both the functional and behavioral standards must be included. There should be little doubt in the minds of either employees or management what satisfactory performance looks like in behavioral terms. This will allow employees to make more informed choices about whether or not to meet the expectations associated with their position.

Finally, there must be a connection between what the employee chooses to do and what he/she gets as a consequence. If the employee meets or exceeds expectations, there should be some “positive” outcome. On the other hand, if he/she falls short of expectations, there should be some “negative” outcome. If we break this connection, we lose the employee’s incentive to do other than that which is most comfortable or convenient for him/her.

So what? Now what? – The first step in the process must be an accurate and thorough diagnosis of the current situation within the organization. The best way to conduct such a diagnosis is to include employees in meaningful ways in the process. If we want to understand the barriers to employees’ excellence, just ask them. They will also know how to remove most of those barriers. An effective diagnosis will allow employees to develop options for resolving issues and more fully leverage opportunities that have been identified during the process.

This process will result in employees producing recommendations that are presented to the organizational leaders or decision-makers for their consideration.

An effective diagnosis answers some important questions:

What is happening in the organization now that may be erecting barriers to employees’ excellence;

What current and emerging opportunities can we leverage more fully; and

What are the viable options for next steps?

This will help decision-makers, with the active involvement of employees, develop strategies and tactics for maximizing employee engagement and minimizing the risk of accidents, spurious Worker’s Comp. claims, and/or “revenge” litigation. Therefore, organizations can use safety programs, leadership and management development as effective risk management strategies.